The Trillion-Dollar Sector

With global markets taking a hit, it's time to take a step back and regroup with the big ideas. Here are some key items to remember:

• Don't lose sight of the big picture, as it's very easy to let emotions and pessimism dominate your investment and process.
• You need to think in themes that are secular in trend, and not hostage to economic cycles.
• Think on a decade-long time frame, and not the next few months. In other words, think global infrastructure.

The indiscriminate shoot-and-sell-everything-now attitude is bringing up good entry points for many stocks in the infrastructure group. This is the time to take advantage of the big secular trend that will still be in full force long after this market malaise passes.

Why infrastructure? Merrill Lynch analysts recently raised forecasts for emerging markets infrastructure spending to $2.25 trillion from $1.25 trillion over the next three years. Even better, the Merrill report notes that the Xstrata CEO Mike Davis sees $22 trillion spent on infrastructure over the next 10 years.

The investment will be led by the growing needs of an ever-expanding global middle class, which will demand the simple luxuries we all take for granted here in the U.S. -- roads, bridges, electricity, indoor plumbing and clean water. Further, infrastructure throughout the world (and here in U.S.) has been neglected for decades and is in need of big outlays just to maintain the status quo.

The majority of the capital expenditures will go into the transportation and energy sector, as detailed in the chart below from Merrill Lynch.

The big spenders are not a surprising cast. Over the next three years, China leads the way with an estimated $725 billion in projects, followed by the Gulf region at $400 billion, and Russia is in third place with an anticipated outlay of $325 billion.

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Patrick Schultz is a research associate at TheStreet.com. He has previously obtained securities licenses under the NASD's Series 7, Series 24, Series 52 and Series 63 exams and has worked in the financial markets on various trading desks in addition to trading for his own account. Schultz holds a bachelor's degree in applied economics from Cornell University.